I am an investment professional managing a multi-billion dollar endowment pool. I am married with two children, and looking to create lasting generational wealth. I hope to provide my children with the tools needed to give them a head start in life.
I’ve spent my entire life in the Midwest. My grandmother and I would discuss mutual funds and utility stocks over games of cribbage. I remember reading Investing for Dummies (the first edition, back in the mid-90s) during a camping trip with my family. Before long, I was investing in tech stocks during the late go-go 90s and luckily, didn’t lose everything.
In college, I majored in finance and accounting, and took every investment course that I could. I was in a metro area with a healthy investment community and joined the university investing club. From there, I was exposed to all different kinds of career paths, from investment banking to management, even to sales. By dumb luck, I managed to get an internship at a local investment management company. Once I graduated, I received job offers from two large corporations and one from the local investment firm. It was a surprisingly hard decision, as the large corporations were offering about $10,000 per year more (although I ignored bonus potential at the investment firm for some reason) and the investment firm was a pretty small firm without the ability to make huge, huge sums of money (see below). I thank my lucky stars every day that I made the right decision.
Beginning in 2004, I began working as an analyst on the trading desk. I was employee number 14, and we were still sub $4 billion at that point. Sounds like a lot, but this firm was more like Vanguard than a 2 & 20 hedge fund (much, much, much! lower fees). Nonetheless, we were doing cool things and had a varied client base that included endowments, foundations, corporate and public pensions, high net worth individuals, and even some sub-advisory relationships with hedge funds and the like.
We had three portfolio managers (all principals of the firm) and I was analyst number four. PMs and analysts did all of the trading. I started work at 4:30am most mornings (to get everything priced and run so the principals would be ready to start trading the second half of Europe at 6-7am), and ended well after the market closed, sometimes staying until Japan opened at 7pm. I’m pretty sure that I was making minimum wage or less at the time, but it was well worth it.
Soap Box Sidebar: I believe in the saying: learn it in your 20s, earn it in your 30s (my current stage), burn it in your 40s. To all of you Millennials out there, suck it up, work 14 hour days, and for god’s sake, get your boss coffee if he/she asks. Nothing, and I mean NOTHING, is below you at this point. Soap box done.
While this was going on, I was also studying for the CFA exams and received my charter in 2008. For those of you who don’t know, the CFA exams consist of 3 all day exams done a year apart that each require 250-350 hours of study. You also need at least four years of relevant work experience. Basically, it’s a royal pain in the ass, but pays off.
The Global Financial Crisis
If you happen to sit on a trading desk during Q4 2008 and Q1 2009, you should be able to add at least five additional years of experience to your resume. For those who only watched from the sidelines or were too young to be working yet, then there is no way to really describe how truly terrifying this time was. I remember days where the entire trade desk would just sit quietly for the last 30-45 minutes of the trading day and watch the increasingly large margin calls that we would be getting the following morning. Just silence, watching the ticks.
There are stories of some very high profile names stocking up on cash because they weren’t sure if the banks would open the following day. Check, did that. My wife works in a completely unrelated field, and I did my best to shield her. Naturally, I had just bought a house in 2007 (and thought I was getting a great deal because it was 10% off the recent highs!), and had a mortgage to pay. There were days that I came home and wasn’t sure if I’d have a job the following day.
I think the best story to illustrate is the weekend I got married. I got married on the Saturday before Lehman declared bankruptcy. We obviously had a feeling that it was coming soon, because Lehman stopped picking up the phone on Thursday and Friday when we were calling and asking for margin. Not like you can cancel your wedding because a major investment bank may or may not go bankrupt. Wedding went well, we had a blast, and left Sunday morning for a week-long “mini-moon” (our full honeymoon was scheduled for six months later). Lo and behold, Lehman declares Sunday night, and I’m on the phone for the next 24 hours with clients trying to figure out our game plan. Let me tell you something – having a conference call with a client at 11pm on Sunday evening is never a good time. I don’t think my wife quite knew what she was getting into.
Thankfully, I made it through the GFC fairly unscathed. Bonuses were cut, but not as horribly so as I imagined. I wasn’t nearly as high up then and I’m pretty sure the owners of the firm took a big hit to protect the rest of us. Yes, there are some good people in the investment space, regardless of what most people think.
If you work long enough in the investment field, you will become a salesperson. My best piece of career advice is to focus on careers that drive revenue, not expenses. If you want to be an accountant, great! Be an accountant at a big accounting firm, no working accounting at a corporation. There are two drivers of revenue in an investment firm: investment professionals (driving returns), and sales (driving new business; hence the job title of Business Development or something similar). As you move up on the investment side, you’ll naturally have more and more client contact. And with more and more client contact comes the expectation of more and more selling.
To be clear, I’m completely fine with that overall. Revenue growth is the lifeblood of any organization (it’s much easier to grow your way out of problems than to cut your way out of problems). But I am a much more pure investment type. That’s what I grew up doing, and it’s what I wanted to stick with. I needed to get back to my roots. That, and Dodd-Frank had just kicked in gear and compliance people and lawyers were really starting to run the place.
So, in 2014, I moved on and joined the investment team managing a multi-billion dollar endowment. Different, because as opposed to doing most of the trading directly, I now come up with investment strategies and then hire someone to do it. But it has broadened my investment reach much more. I used to be almost all public markets and now I am also responsible for managing our private investments as well (private equity, natural resources, real estate, etc.).
An endowment is not so unlike a family with assets. In fact, many of our peers work at family offices. We have similar return goals, similar horizons (a family fortune is, hopefully, as long term as an endowment), but endowments do not have the same tax issues. That is the primary difference, and is what allows an endowment to do much more in the private debt space, for example.
These experiences are what I will draw on to help build out my family’s wealth plan.
As briefly mentioned above, I was lucky enough to convince my wife to marry me in 2008. We had our first child in 2012, at which time she left the paid workforce to care for the kids. Kiddo number two came in 2015, and we’ve been plugging along ever since. We’re a fairly high income family, and I am focused on turning that into something lasting beyond a few generations.
We also have a large extended family (both of us came from families with four kids). In fact, I think our extended family is a fairly representative sample of America at large. My wife’s family is mainly blue collar, while my family is mainly white collar. Beyond us, nobody in the family really has a clue about finances and investing. Some are decent savers (at least relative to most people), while others can’t keep two nickels in their pockets.
I do my best to help when asked but it’s a constant struggle. People only change when they want to change. I do not really think there’s a way for a third party to force change upon someone; it just won’t work. So my wife and I have struggled between helping too much and feeling like we’re being taken advantage of, and helping too little. It is a really tough problem, and will be a focus of this blog from time to time as well.
What I hope to get out of all of this
I see myself as a builder. I strive to be the patriarch of my family. But, I have no role model for that. None of my parents or in-laws are strong family figures. They are active in our lives, but their example is not enough to build a great family the way I envision it. Close-knit and supportive. I want to help my children build the character and skills required to ensure that my great grandchildren and beyond have a strong base and a head start compared to their peers. Hopefully we can all learn along the way together.
Keep building my friends.